SAN FRANCISCO, July 13 (Reuters) – In a frenzy not seen since the birth of social media in the early 2000s, investors are pouring billions into generative AI to fuel a San Francisco startup boom.
At the same time, it raises hopes that the nascent AI sector will help revitalize downtowns that have declined post-pandemic.
But the rapid growth of the artificial intelligence business may not be a panacea for the city’s economic and commercial real estate woes, according to a dozen tech industry experts interviewed by Reuters. Unlike past tech booms that have engulfed San Francisco, the generative AI boom will bring fewer jobs because AI companies excel at lean work and automation.
“I think the optimism that AI will help San Francisco commercial real estate rebound should be tempered,” said Silicon Valley investor Jeremiah Owiyan. “The mindset of an AI startup is AI-first, which means he lets the AI do the work before the humans do the work.”
Eleven of the nation’s top 20 AI companies are based in San Francisco, raising a combined $15.7 billion from 2008 to 2023. However, San Francisco Mayor’s Office of London Breed’s analysis found that the city employs only 3,400 people in total. Data from venture capital firm NFX.
That’s just 2.3% of the estimated 150,000 day laborers lost in downtown San Francisco during the pandemic. Before the COVID-19 outbreak, office workers accounted for nearly three-quarters of the city’s gross domestic product.
Generative AI, which learns from past data to create entirely new content, is seen as a game changer for workplace efficiency, especially for software engineers who are the cornerstone of San Francisco’s tech workforce. AI is already reshaping jobs. A study by popular code hosting platform GitHub found that 92% of his software developers use AI, and a developer who used GitHub’s coding assistant was able to complete coding tasks 55% faster than him. I was.
“These (AI) companies like Airbnb (ABNB.O) and Dropbox (DBX.O) are thousands of people,” said Erin Priceright, a partner at San Francisco-based Index Ventures. It will almost certainly not have an employee or an in-house cafeteria.” . Both Airbnb and Dropbox are based in San Francisco and employ about 10,000 people together.
By contrast, OpenAI, backed by Microsoft (MSFT.O), which developed the hit chatbot ChatGPT, said it has raised more than $11 billion in eight years and has about 500 employees. Headquartered in the city’s hipster Mission District, the company uses AI to help solve problems.
For example, when faced with a high volume of support tickets, OpenAI chose to train its own AI to help staff answer these tickets more efficiently, according to OpenAI employees with direct knowledge of the project. Did.
A spokesperson for OpenAI said the company uses its products to support operations, but is also actively recruiting personnel for customer support and other areas.
“We are getting to a point where AI can act like a real employee,” said Matt Schlicht, CEO of Octane AI, which tailors online shopping to individual needs. “In your lifetime, you will see a single team build a billion-dollar company.”
3 AI events per day
San Francisco has earned a reputation as the “AI Capital of the World,” as its mayor recently dubbed it, even as it battles social problems like drugs, homelessness and rising housing prices.
Dubai-based entrepreneur Mike Grabowski, for example, told Reuters he saw a tweet by Silicon Valley investor Owiyan in June. It said, “San Francisco has had 44 AI events in two weeks, about three per day.”
Grabowski, who started a company that uses AI to write content for social media influencers, hopped on a plane to San Francisco the same day. Two days later, jet lagged but optimistic about meeting prospective investors, he attended an AI event hosted by Owyang. It is said that there were 560 applications for participation in the exchange meeting.
Excitement about AI is palpable at tech events in the city, reminiscent of the pre-pandemic decade when Alphabet’s (GOOGL.O)’s Google and others opened offices and startups colonized the town’s more industrial areas. .
The “City by the Bay” became a tech hub at the same time as an eight-year tax cut called the “Twitter Tax Cut” aimed at encouraging tech companies to move.
But lately, the San Francisco issue has been making headlines.
More than 30% of office buildings have vacated as people continue to work from home, venture capital firms are choosing quieter parts of town and many big tech companies are laying off staff, according to real estate firm CBRE (CBRE.N). is vacant. BART ridership in downtown San Francisco is still at one-third of its pre-pandemic levels, according to city government data.
A deepening drug and homeless crisis has alienated tourists and business travelers, pushing some hotels to the brink of default. Falling foot traffic has forced companies such as Nordstrom (JWN.N) to close downtown stores.
Some tech experts believe AI will still power the city’s economy over time, even if it has a different fate than previous tech booms.
San Francisco-based root VC technology investor Lee Edwards says AI will make it easier to run companies, with dozens of people employed, as opposed to a few big tech companies that used to employ thousands. There will be more small businesses hiring people, he said.
And some believe it will continue to do so, with fewer people benefiting from technology, exacerbating the inequalities already plaguing California’s third-largest city.
“Generative AI is even more concentrated than previous waves of digital technology, with few Businesses will be at the forefront,” he said.
“Top management and their senior engineers, programmers and managers will benefit even more.”
Reported by Anna Tong of San Francisco.Editing: Sayantani Ghosh, Anna Driver, Matthew Lewis
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